Commentary, Investing, Tools, Trading
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Wine investing and trading II: Provenance

The next few blogpost in this series are adapted from reports available on the WineQuant website which you can find here and here. In this post, I will discuss why I have chosen to use trading data available from Liv-Ex.

Liv-Ex is the foremost wine-exchange platform on the UK wine scene. Traders with accounts there are able to put their offerings for others to bid. Trading activity is high and the platform gives a nice snapshot into the fine-wine market scene in the UK. There is a lot of trading data available on the platform such as the number of bottles available on the market, monthly highs-and-lows, auction bids and so forth. Non-trade users can use a subsidiary service from Liv-Ex called Cellar-Watch which gives access to some of the trading data available.

One of the main strengths of the Liv-Ex platform is its provenance-verification certificate called Standard in Bond (SIB). On the regulations section of Liv-Ex’s website, wines that are given this status must obey the following conditions: the original wooden packaging must be in good condition, levels to base neck or better, capsules original and undamaged, labels clean and undamaged. In addition, the stock cannot be re-imported nor can they carry strip labels from Asia, USA or non-European regions as well as merchant labels. Such stringent rules helps to ensure the provenance of the stock traded under this contract.

There are also other strengths of using this particular platform, one of which includes protection for both the buyer and seller on the platform. There are strong terms on the contracts behind the transactions to achieve this.

It comes as no surprise that provenance is very important for fine-wine trading. We know that not every bottle of wine is the same. Furthermore, we want to make sure the wines we are buying have not been shipped to and fro around the world in non-ideal conditions. You will often hear consumers asking traders for discount if the provenance is weak. In Hong Kong, Bordeaux wines that carry labels from the USA often have to be discounted.

Herein lies a potential business proposition for provenance verification in the States. Auction houses and merchants carrying the appropriate export licence should look to work with an independent provenance verifier if they are looking to tap into external markets. Especially with the Trans-Pacific Partnership agreement already in place (and awaiting ratification in the member states), there is massive potential for the US to be potential wine-distributor to the other member nations of this partnership (likewise, a similar argument can be made for Singapore to take her proposition of becoming a major wine hub further).

That aside, it is clear from the above points why using trading data from Liv-Ex is a useful starting point for understanding the tools which WineQuant develops. The data is sound and fairly encompassing. Over the next couple of posts, I will delve more deeply into the tools which we have already developed here at WineQuant.

Other readables for this week:

RL @ WineQuant

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